(Note: A version of this commentary
appeared in the
Lansing State Journal on March 30, 2008.)
are rushing to grant extensive refundable tax breaks, government loans and even
outright cash handouts to the film industry. Upping the ante from the usual
discriminatory tax breaks betrays a tinge of desperation among business subsidy
The film package is
being sold as an economic development initiative, but it’s unlikely to have any
significant effect on this state’s failing economy. That’s because Michigan’s
current gross domestic product is nine times the size of the entire U.S.
film and sound recording industry, according to the federal Bureau of Economic
A comparison with
the auto industry puts this in perspective. In terms of personal income by
industry, the entire U.S. "motor vehicle body, trailer and parts" industry
accounted for $86.2 billion in 2006. Michigan got $22.1 billion of that, while
California’s share was $2.6 billion. The entire U.S. "motion picture and sound
recording" industry was a bit more than one-fourth that size: $25.7 billion.
Michigan’s share was a measly $186 million, while not surprisingly, California
got $15.3 billion.
For context, the
total personal income for Michigan residents was $341 billion in 2006.
One could look at
this state’s tiny share of the film industry and rightly conclude that there’s
room to grow, but not even the legislators who voted for the handouts or the
governor who called for them can believe that Michigan will ever get more than a
tiny slice of that industry. And even if the Great Lakes State somehow managed
to garner 5 percent of the nation’s entire film production (half-again more than
our "fair share" on a per capita basis), our state GDP would increase by a
barely-noticeable 0.6 percent.
Looking at just the
feature-film portion of the industry (the bill seeks to attract TV shows, music
videos, sound recordings and more in addition), the Motion Picture Association
of America reports that 603 movies were released in 2007. To capture 5 percent
of that Michigan would have to attract the equivalent of 30 average-sized
Our chances of
meeting that milestone are slim, given that scores of states are also looking to
"pick each other’s pockets" by using similar tax breaks and handouts to pursue
the same Hollywood dreams. Reportedly, the just-passed package puts Michigan in
line with the richest of these, offered by New Mexico and Louisiana.
It’s not as if
Michigan is bidding for a role in a fast-growing industry, either. Film industry
growth has been so dismal since 2002 that Michigan’s faltering GDP growth rate
has actually kept pace with it.
Like all such
targeted subsidy and tax break programs, the main purpose of the film handouts
will be to give the appearance of "doing something" while legislators avoid the
heavy lifting of passing the broad-based tax, regulatory and labor law reform
that would genuinely fix our broken economy. If they were less star-struck,
legislators would finally begin the transformational restructuring and
downsizing of government needed to make possible lower taxes for all job
providers — not just those who hire movie stars.
Jack McHugh is senior legislative analyst and
James Hohman is a fiscal policy research assistant for the Mackinac Center for
Public Policy, a research and educational institute headquartered in Midland,
Mich. Permission to reprint in whole or in part is hereby granted, provided that
the authors and the Center are properly cited.